Documentation ensures smooth release
Published 05/01/08

When an employer fires an employee and provides her severance pay she would not otherwise be entitled to, the employer should seriously consider requiring the employee to sign a release in exchange for the severance pay.

A clear and properly drafted signed release may prevent the employer from incurring substantial costs in time and money to defend a potential legal claim by the former employee since the courts will generally enforce such a release and bar the former employee from bringing a claim against the employer. The New Hampshire federal court ruled such on April 16, 2008 in the case of Carol A. Budro v. BAE Systems Information and Electronics Integration, Inc .

In that case, Carol Budro represented herself and alleged that BAE violated the Age Discrimination and Employment Act (“ADEA”) by denying her employment opportunities within the company because of her age and by terminating her after she complained.

Budro had been laid off as part of a reorganization. She had been employed from 1972 until she was laid off on August 4, 2006. Boudreau had worked with a team setting up a test lab for BAE and her primary role involved acquiring materials and equipment. According to Budro, once the lab was complete, her managers told her that there were no employment opportunities in BAE that required her skill set.

She also claimed that two supervisors respectively commented: “when are you going to retire?” and “at this point, you should retire.” In response, Budro contacted BAE's Human Resource Department and requested an alternative dispute resolution with regard to a claim of age discrimination.

When Budro was laid off, she was given the option to preserve any claims, if any, she had against BAE and receive a basic severance benefit, which for her amounted to $1,937.60, or take the supplemental pay on the condition that she sign a release. The supplemental severance pay for her totaled $27,126.40. Budro took the supplemental severance pay and signed the release.

The Court found the release complied with all the special provisions necessary to make it valid under the ADEA including giving her the right of up to 45 days to review the release with additional information to determine how older workers were affected in the layoff. In an employment termination not related to a mass layoff, but solely related to one employee, the time period given to them to review a release is 21 days. Thereafter, if the employee has signed the release, she has 7 days to revoke her acceptance of the severance pay in exchange for the release, but thereafter cannot revoke the release as it is binding.

In Budro's case against BAE, the New Hampshire Human Rights Commission and the Equal Employment Opportunity Commission, and thereafter the New Hampshire federal court all found that the release was binding thereby dismissing Budro's claims against BAE without her having an opportunity to be heard before a jury. Irrespective of whether Budro's underlying claim of age discrimination had merit or not, BAE saved substantial costs of litigation, both in time and money, by having a properly drafted and executed release which they could call upon to have the court dismiss the case.

If an employer believes an employee may have sufficient claims so as to not want to sign a release in exchange of the severance pay offer, the employer should contact its employment counsel to discuss the specific circumstances of that case to determine the best strategy when dealing with that employee including, but not limited to: deciding not to terminate that employee at that time; awaiting further documenting of performance problems, if any, before terminating the employer; or increasing the proposed severance payment to be paid in exchange for the release.

J. Daniel Marr is a director and shareholder of Hamblett & Kerrigan, P.A. His legal practice includes counseling businesses and business persons on a variety of legal issues, including employment, and advocating on their behalf. You can reach Attorney Marr by e-mail at: dmarr@hamker.com

This information is general information and may not reflect the most current legal developments, verdicts or settlements. The information provided should not be relied upon as an indication of the actual state of the law or of future developments. The information contained on the Hamblett & Kerrigan website is for informational purposes only and does not constitute legal advice. If the information referenced may be of legal importance to you, you should consult with an attorney to provide you with legal guidance and opinion as the the effect of the current law upon your situation.